‘One or none’ also gives workers, unions choice

Even with Michigan’s right-to-work law, workers do not have full freedom. In bringing true fairness to both unions and workers, Michigan has the power to give public workers a complete choice when it comes to associating with a union, while at the same time lifting government unions’ burden of representing nonmembers.

In Michigan, unlike non-right-to-work states, workers do not need to pay a union to keep their jobs.

However, in both types of states, employees in a unionized job must accept union representation whether they want it or not.

But right-to-work isn’t the only option available for bringing real fairness to the workplace. In a few short weeks the Mackinac Center will publish a study introducing a concept called “one or none,” which would allow workers to fully opt out of union representation and represent themselves.

As I detailed in a 2013 op-ed in the Detroit Free Press, opponents of right-to-work attempt to make it an issue of either/or. They claim either unions will have to represent workers who are not paying them or that workers will have to pay for unwanted representation.

Some opponents even go as far as calling workers who opt out of union representation “free riders.”

However, Terry Bowman, a United Automobile Workers member and president of Union Conservatives, says there is a better term for this kind of worker: a “forced rider.”

Forced riders have to accept the contract the union negotiates. And in most of those cases, people who have a problem with the employer must go through the union.

But states have the ability to solve the forced-rider problem, at least for public employees. While private-sector collective bargaining is governed by federal legislation, public-sector collective bargaining is governed by state law.

Lawmakers could simply amend state law to allow workers who do not want to associate with a union to opt out and represent themselves.

Instead of doing away with exclusive representation, a one-or-none policy could be adopted.

One-or-none legislation would not disturb the normal exclusive bargaining relationship between public employers and unions. Unions would still need to get a majority of workers to agree to representation and the one union would be the only representative in the workplace. This union would still negotiate for all unionized employees and nothing would change in terms of collective bargaining.

However, employees who do not want to be in the union would be free to represent themselves. They would not have the ability to create a minority union or create multiple unions at a workplace, but instead would be treated as normal non-union employees.

Public workers would finally be given a true choice of whether to associate with a union, accept representation and pay for it. A one-or-none law would also alleviate one of the main problems unions have with right-to-work, which is representation without pay.

If unions are doing a good job and representing their members well, nonmembers would be willing to pay for their services.

Right-to-work opponents maintain that “free riding” is unfair. While forced riding is unfair for both workers and unions, mandating that workers pay for something they do not want from a private third party simply to keep their jobs is a greater injustice.

The best option is to give workers the chance to say “no thanks,” and unions the ability to say “goodbye.”

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Guns, drones and votes. Subsidies ate the budget.

Senate Bill 54, Ban using a drone to interfere with hunters: Passed 38 to 0 in the Senate

To prohibit using an aerial drone to interfere with or harass a person who is hunting. This would expand an existing law that bans interfering with or harassing hunters. Senate Bill 55 bans using a drone for hunting and also passed unanimously.

To revise the “gun free zone” provision of the concealed pistol permit law to exempt retired federal law enforcement officers who carried a firearm during their employment. This provision prohibits regular citizens who have received a permit after meeting the background check and training requirements from carrying a pistol in specified places including schools, bars, restaurants, churches, arenas and more.

To shift funding sources in the current year school budget to compensate for lower than expected balances in the state general fund. This is due to higher than expected payouts to corporations granted selective “tax credit” deals lasting up to 20 years by the previous administration (in many cases these are actually cash subsidies). This unexpected draw-down in some state accounts is happening despite revenue collections actually rising faster than spending this year. The bill also reduces previously authorized spending to reflect lower than expected school enrollment, and suspends payments intended to “catch up” on underfunding of the school employee pension system.

SOURCE: MichiganVotes.org, a free, non-partisan website created by the Mackinac Center for Public Policy, providing concise, non-partisan, plain-English descriptions of every bill and vote in the Michigan House and Senate. Please visit http://www.MichiganVotes.org.

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Michigan should end the MEDC

From 1995 to 2011, Michigan ran a program that granted special tax exemptions to chosen companies. The research on this program – the Michigan Economic Growth Authority – has been pretty consistent: It was a failure.

The Mackinac Center did two studies on MEGA; a 2005 study showed that the few jobs “created” from the program were temporary and expensive and a 2009 study found that it had an overall negative impact on Michigan’s economy. The Michigan Office of the Auditor General has found repeated problems with state “economic development” programs over-promising and under-delivering. The Anderson Economic Group found a negative impact on job creation. The only favorable study was done by the Upjohn Institute, but even that found only a very small positive economic effect and that the actual MEGA program was almost incidental to the state’s economy. A recent review of the program showed that only 2.3 percent of the projects given tax credits ever met their job projections.

Though the program was ended in 2011, it lives on. Michigan taxpayers are on the hook for up to $9 billion over the next two decades because of credits handed out over past years. This will cause a continuing hole in the budget.

So what is the defense of the Michigan Economic Development Corporation?

MLive business columnist Rich Haglund, who has written positively and critically of its programs in the past, offers one up. In a recent article, he says that when former Gov. John Engler eliminated some “economic development” programs in the early 1990s, Michigan “quickly gained a reputation for having unilaterally disarmed in the war among the states for jobs.”

He adds: “[T]he agency offers some valuable programs, particularly those that aid entrepreneurs and community development. And it has tight linkages with local economic development agencies, which would suffer if the state sacked the MEDC. The reality is that the states are engaged in a costly battle of their own making for jobs and business investment. Unless this war is somehow ended, it would be unwise for Michigan to disarm again.”

This is mostly anecdotal and even Haglund admits in the piece, “[The MEDC’s] overall impact on job creation is arguably minimal.”

Besides the fact that the bulk of the research shows poor economic effects from Michigan’s programs, there are two main reasons the state should not be in the business of deciding which companies get special favors and which have to pay to subsidize their competitors.

First, centralized planning just doesn’t work. This is because of the “economic calculation problem” developed by Ludwig von Mises. In short, no centralized actor (even a large and democratically elected one like a state government) can possibly have more knowledge than the market as a whole, which means attempts at “economic development” will most often do more overall harm than good because it will misallocate resources away from their most productive use.

Second, government programs tend to expand beyond their core mission. While the MEDC and MEGA started as small, focused programs, they quickly grew larger. During the administration of former Gov. Jennifer Granholm, the agency expanded into all kinds of areas, with bipartisan support. Today, much of what was done is widely recognized as having caused more economic harm than good. It’s good that MEDC has shrunk – but that doesn’t mean it will stay that way.

The MEDC does more political development – helping politicians look good – than economic development. The state should end it.

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Members of the Michigan House of Representatives today announced efforts to reform the state’s criminal laws. The efforts will be spearheaded by a working group, co-chaired by Rep. Chris Afendoulis, R-Grand Rapids Township, and Rep. Kurt Heise, R-Plymouth.

The group will identify antiquated or unnecessary criminal statutes that can be repealed, and will recommend penalties that fit the severity of the crime. A package of bills introduced would repeal numerous outdated laws. The announced reforms are part of the House Republican Action Plan.

A 2014 study published by the Mackinac Center and the Manhattan Institute found that Michigan has more than 3,100 laws on the books and has created an average of 45 new crimes in each of the last six years.

Legislators are taking an encouraging first step toward a comprehensive review of Michigan’s criminal code. Its criminal law is overgrown with prohibitions that do little to protect personal safety or property. The House would do well to review even more criminal laws, particularly where the law harshly penalizes activity that most residents would consider harmless. In addition to repealing silly or outdated laws, the Legislature should enact a “default mens rea” bill, which would clarify the criminal intent required for the commission of a crime.

The Mackinac Center has done hundreds of news articles and commentaries about the lack of jobs generated by the MEDC's Michigan Economic Growth Authority (MEGA) tax credit program, which was eliminated in 2011 but is in the news because the state budget is taking a hit due to past deals.

A 2009 study and 2005 study found that state corporate welfare programs exaggerated job claims and cost more money than they were worth. Numerous reports from the Michigan Auditor General found similar results.

I’m going to touch on three issues in the next few minutes. First, some recent history on Michigan’s government economic development programs. Second, characterizing what an extensive body of scholarly research on such efforts has found. And third, offering some reform recommendations.

In the modern era Michigan first began systematically trying to influence the direction of the economy under Gov. Kim Sigler in 1947. Since then every governor has put his or her stamp on the activity, with several major expansions along the way.

Fast forward to 1995, when Gov. John Engler created the Michigan Economic Growth Authority. This granted select firms Single Business Tax credits in in return for agreements to create a specified number of jobs — initially there was a minimum of 75 or 150 jobs.

The program was used sparingly at first, with only 15 deals during its first full year. However, by mid-2009 the statute had been amended 20 times, mostly with eligibility expansions and weakening of once-tight requirements.

As rigorous performance thresholds and standards for companies were eroded, use of the program steadily grew. In 2010, 110 MEGA deals were announced.

A graphic illustrates the rise in MEGA deals overlaid with Michigan’s unemployment rate. To many observers it appeared that MEDC’s main response to plummeting state employment was ever increasing job press releases. The reality was, even with its MEGA powers, the MEDC presided over arguably the worst economic decline in Michigan’s history.

MEGA has been around long enough that several institutions have performed systematic studies. None of these gave a full-throated endorsement, though one had a more positive take.

The figure overstated the impact because it did not control for how the firms without special favors fare. Studies published by the Mackinac Center in 2005 and 2009 did control for this, and found lower job creation impact.

In 2010 the Anderson Economic Group found that the opportunity cost of running the program versus comparable across-the-board business tax cuts cost Michigan 8,200 jobs.

This is the only positive assessment I am aware of. Upjohn scholars argued MEGA had created 18,000 jobs over 11 years, a very modest 1,600-plus per year.

The Mackinac Center’s 2005 MEGA study found that for every $123,000 in tax credits offered just one construction job was created, all of which disappeared within two years. The program had zero net impact on manufacturing or warehousing employment.

In 2009 we did a second MEGA study that found a statistically significant link between MEGA and manufacturing jobs — but it was negative. For every $1 million in credits actually earned there was a loss of 95 manufacturing jobs in counties with MEGA firms.

More broadly, a great deal of academic literature exists on selective business incentive programs. Overall, the assessments are unflattering. The title of one 2004 compilation of findings tells the tale: “The Failures of Economic Development Incentives.” Here’s an excerpt:

Since these programs probably cost state and local governments about $40-$50 billion a year, one would expect some clear and undisputed evidence of their success. This is not the case. In fact, there are very good reasons … to believe that economic development incentives have little or no impact on firm location and investment decisions.

First, government has nothing to give anyone it doesn’t take from someone else. At best these programs just redistribute income.

Second, doing that costs money. Just the MEDC staff expense amounts to tens of millions annually.

Third, it also misallocates scarce resources. MEDC employees are not imbued with Warren Buffet-like ability to pick winners and losers in the marketplace. If they were, they would be billionaire hedge fund owners, not civil servants.

Lastly, bureaucrats are inherently inclined to make decisions based on political rather than economic factors. That’s a recipe for bad performance in a competitive marketplace.

What’s the solution?

The truth is these are mostly political development programs, not economic development programs. They’re a perennially attractive nuisance for elected officials, but the public is catching on. The political costs of supporting these programs are starting to catch up with the perceived political benefits.

The solution is actually quite simple: Just say no, starting with the appropriations process. We estimated last year that “just say no” would save at least $300 million in the current budget. Next year it will be more. The usual counter-argument is that since other states do it this would amount to “unilateral disarmament.” My response is, let the other states keep their expensive and ineffective pop-guns — we will surpass them by offering all opportunity seekers a fair field with no favors.

In the meantime, while the agency still remains, it absolutely must be made more transparent. The MEDC is almost certainly Michigan’s least transparent government agency. A 2009 Mackinac Center Policy Brief gave startling details of this dismal record.

The current administration has tried to change this. Still, as the budget drama of the past few weeks has shown, the liabilities created by past MEGA deals are still surrounded in mystery, secrecy and uncertainty.

Actually, the MEDC wasn’t always quite so secretive. From 1995 through part of 2009, when asked it routinely provided breakdowns of the value of credits claimed and the companies claiming them up.

However, our 2009 study of MEGA could not be replicated today because since then officials have asserted “administration of a tax” confidentiality. To the extent this is anything more than a specious effort to dodge accountability, the assertion raises troubling questions:

If the state violated the law by publishing such data in the past was anyone called to account? Did anyone lose their job?

Who at Treasury or the MEDC decided that such data was now off limits, and why didn’t they make this determination sooner?

Demand that the MEDC or Treasury explain why “administration of a tax” secrecy applies now but not in the past.

Require that current claims of any past MEGA credits must be accompanied by public disclosure of their value by company, agreement, and when the credits were claimed.

Require the MEDC identify which MEGA projects are no longer active.

Going forward, any company that accepts tax credits, abatements or subsidies should waive any right to privacy related to its transactions with the state, including cash disbursements and taxes foregone by the state.

For the MEDC, mandate a rigorous and independent “opportunity cost” estimate of every program, similar to the one performed by Patrick Anderson. Don’t let the MEDC choose the consultant! Maybe the Auditor General could do that.

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Who voted “yes” and who voted “no” for $2 billion tax increase

Posted on February 18, 2015 at 12:00am

Approximately two billion dollars in additional taxes will be collected if voters approve a May 5 ballot proposal, based on figures projected by Michigan's legislative fiscal agencies. Here is the breakdown:

The May 5 ballot measure would increase the state sales tax from 6 percent to 7 percent. If approved by voters it would by itself collect an additional $1.427 billion in sales tax each year, and also automatically trigger an additional $523.9 million tax increase in the first year, and $663 million annually when all tax changes are fully realized (not counting inflation indexing provisions that could make the number higher in future years).

If voters say “no” to the ballot measure these other tax hikes will not go into effect. They include:

A net gas and diesel tax hike of $463 million. The actual increase will depend on the price of fuel.

Vehicle registration tax changes that will raise $10.9 million in the first year, and $150 million when fully realized.

A $50 million increase in truck registration taxes.

This is on top of a $60 million Internet sales tax that goes into effect regardless of the May 5 vote, reportedly enacted as part of the deal to put the sales tax increase on the ballot. The package also increases by $260 million state spending on low-wage household income enhancement subsidies distributed as tax credits, which is contingent on a “yes” vote.

The House Fiscal Agency has published a detailed analysis of the entire package. All told it is projected to collect around an additional $2 billion each year, of which $1.2 billion will go to road funding.

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Here are the December 2014 votes that placed the sales tax increase on the ballot, and authorized other tax hikes, most of which are contingent on its passage:

2014 House Bill 5477: Increase gas taxTo replace the current 19-cent per gallon gas tax to 41.7 cents, and the 15-cent diesel tax to 46.4 cents, and index these taxes to inflation. This would be partially offset by exempting fuel sales from the state sales tax (House Bill 4539). However, neither bill will go into law unless voters approve House Joint Resolution UU in a May 5, 2015 vote, which would increase the state sales tax from 6 percent to 7 percent. When combined with other tax hike bills in the package it represents a net tax increase of around $2 billion.

2014 Senate Bill 847: Increase Earned Income Tax CreditTo increase the state earned income tax credit from an amount equal to 6 percent of the federal EITC to 20 percent, which will distribute around $260 million annually to low income wage households in the form of a “refundable” tax credit, where a check is sent to households who owe no income tax. This will not go into effect if voters do not approve the sales tax hike in a May 5, 2015 election.

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Last year, the Legislature passed a bill that blocks the direct sale of automobiles in Michigan. This makes it significantly more difficult for innovative car manufacturers, such as Tesla and Elio, to do business in Michigan, and limits the choices of consumers. Although cars dealers benefit from having their competition curbed, a 2009 study by the U.S. Department of Justice claims that this policy, according to the best available estimate, costs consumers about $2,000 extra per vehicle, or about 9 percent of the average cost of a new car.

The Mackinac Center has signed on to a public letter which explains, from many different perspectives, why this policy is harmful. We are co-signers with the Sierra Club, Institute for Justice, Consumer Federation of America, Americans for Prosperity, Environment America and the American Antitrust Institute, among others.

You can read the full letter below.

Sign-on Statement to State Government Leaders About the Anti-Consumer Effects of Laws Prohibiting Direct Distribution of Automobiles

We, the signatories of this letter, represent a broad range of public interest organizations. Our individual interests include such diverse matters as environmental protection, economic freedom, fair competition, consumer protection, and technology and innovation. Some of us frequently find ourselves on different sides of public policy debates. However, we now find common ground on an issue of considerable public importance concerning state laws that restrict the purchase and sale of automobiles. In short, we oppose efforts by state legislatures or regulatory commissions to forbid car manufacturers from opening their own stores or service centers in order to deal directly with consumers. Such laws are unnecessary for consumer protection, interfere with competition and efficient distribution, increase costs to consumers, and mount barriers to the introduction of innovative and beneficial new technologies.

At present, many states have on their books decades-old laws addressing the relationship between car manufacturers and their franchised dealers. These laws were ostensibly designed to protect dealers from unfair practices by their franchising manufacturers. Among the provisions in many of these state laws are prohibitions on automobile manufacturers opening their own showrooms and service centers and dealing directly with consumers. At the time these laws were passed many decades ago, the car dealers argued that manufacturers should not be allowed to compete directly with their own franchised dealers, since they might then be able unfairly to undercut their dealers on price.

However valid these concerns may or may not have been at a time when the “Big Three” manufacturers dominated the market, it is important that the law keep up with the changes that have occurred in the automobile market today. The automobile industry is far more competitive today than it was in the 1950s, with many more manufacturers participating on a significant scale. This increased competition gives dealers more choices in franchising relationships and greater bargaining power to protect themselves against unfair trade practices by manufacturers, thus undercutting the original rationales for these laws. More fundamentally, there are no valid reasons to use these laws that were intended to protect dealers in franchising relationships to thwart new market entry and competition from companies that do not seek to use franchised dealers at all. While we take no position in this letter on the appropriateness of many other aspects of dealer protection laws, we are strongly opposed to efforts to use these laws to block direct distribution.

Much of the recent public debate on this issue has centered on Tesla Motors, which makes all-electric vehicles, and seeks to distribute and service its cars directly to consumers. Tesla has explained that its direct distribution model is necessary because traditional car dealerships have been unwilling or unable to promote electric vehicle sales with sufficient expertise or vigor. Tesla’s market entry through direct distribution is providing consumers with beneficial new choices on what vehicles they buy and how they buy them. Moreover, our concerns are not limited to Tesla, as these laws have similarly negative effects on any company seeking to distribute their cars directly to consumers.

These laws have negative consequences for the entire automotive industry—including what kinds of cars are built and sold, how they are powered, and what innovative new technologies can reach the market. Direct distribution could significantly reduce costs for consumers and increase customer satisfaction. These laws retard innovation by making it harder for new technologies to achieve wide distribution and hence reach an adequate scale to be sustainable in the market. They put one more obstacle between consumers and the technologies that can help reduce carbon emissions and prevent consumers from accessing clean cars. Finally, these laws do not rest on a legitimate public policy basis for constraining the ability of a company to choose how to operate its business.

The diversity of perspectives represented in the coalition signing this letter reflects the importance of this issue on multiple fronts. We call on legislators, governors, and other public servants across the political spectrum to take a stand against laws that block direct automotive distribution to the detriment of innovation, the economy, consumers, and the environment.

To tie-bar the presidential primary bill to Senate Bill 59, meaning it cannot become law unless SB 59 does also. SB 59 would eliminate the requirement that a person give one of the reasons specified in statute for requesting an absentee ballot.

This week Gov. Rick Snyder issued an executive order trimming $102.9 million of state spending in the current fiscal year, as required by the state constitution when spending exceeds projected revenue. The House and Senate Appropriations Committees approved the order, which is also required by the constitution for it to go into effect.

Although state revenue collections are actually rising faster than spending in the current year, a shortfall occurred because corporations and developers who were granted selective “tax credit” deals by the previous two administrations are reportedly “cashing in” $351 million more of these this year than originally projected. These deals extend as much as 20 years into the future, and in many cases the “credits” are actually taken as cash payments from the state. (Government secrecy prevents discovering the amount taken in cash.)

The largest cut in the executive order isn’t really a “cut” but is removing $16 million from the budget that had been appropriated for disaster relief but not spent. The largest real cut is reducing state subsidies paid to film producers this year from $50 million to $38 million. Another $17.8 million will be saved by trimming a number of Department of Corrections programs and prison expenses. The rest of the cuts are smaller amounts spread across a broad range of government programs.

Here are the House and Senate Appropriation Committees roll call votes on the executive order:

SOURCE: MichiganVotes.org, a free, non-partisan website created by the Mackinac Center for Public Policy, providing concise, non-partisan, plain-English descriptions of every bill and vote in the Michigan House and Senate. Please visit http://www.MichiganVotes.org.